Update October 27th, 2010

**Adding this about 11:15pm ET:  $NYMO almost tagged its lower BB today and it’s probably close enough to initiate some kind of bounce or consolidation tomorrow, Thursday, 10/28. The last time $NYMO tagged its lower BB was on 10/19 and the market halted its decline then and entered this upward, sideways consolidation we’ve been in ever since. $NAMO came close to its lower BB so same thing there.**

***Added 9:00am ET October 28th:  Regarding this discrepancy between the $COMPQ and cumulative $NAAD, I went back to the March o9′ lows and came forward looking for other instances similar to the one from yesterday. I found five such instances. One of these had no impact on the markets. One preceded a one day pull back by one day. Three preceded multi-day pull backs. The current discrepancy is the most radical of the ones I found. From the action in the PM so far, it appears that this obvious sign of market weakness will not alter market direction. Today.

Here are the dates:

November 16th, 2009

December 28th, 2009

February 3rd, 2010

July 14th, 2010

Equally important is when you see $NAAD ticks up while the $COMPQ is in a down trend. That appears to be the day you get out of shorts and go long.***

$NYA close to having a DI bearish X, but close doesn’t matter. I have a little chart I call the mechanical trading system, which I’ll put up one day, that is very close to giving a sell signal on this important index.

IWM down on heavier volume and one day away from Bearish DI X.  IWM is also in a symmetrical triangle pattern on the daily chart. This has a 75/25 chance of breaking to the upside. If you remember, XLF was in a similar pattern, did break out topside, but then crashed back through the pattern a few days later. Not saying this is going to happen to IWM, just sayin’.

IYR looking weak and very close to a sell signal.

RTH looking bad here, also close to a sell signal.

Of course, whenever I mention any of the weak sectors, they get rallied the next day, so there you go.

$BPSPX rose today.

$SPX50R continues to drop.

$NAHGH went backwards today, which is interesting because the $COMPQ seems unstoppable. However, $NASI had a negative tick today and that should not be happening in this supernatural, almost mystical index. Seriously.

$NAA50 & $NAA150 went backwards again today. See bottom of yesterday’s post for the chart.

$SPX tested the trend line, and the trend line held. I usually say that’s all that matters, but I’m not so sure this time. It’s the next chart that is bothering me.

Click here to open chart in new window.

This chart of the cumulative $NAAD is not right, or happy. I haven’t had much time to back test it, but instances of this kind of divergence appear to be very rare. Even in April, $NAAD managed to stay in step with the $COMPQ, it just put in lower highs so you had some negative divergence. But it went up when the $COMPQ went up, which is the key. Same in August. $NAAD stayed in lock step with the $COMPQ, but at lower and lower levels so you had negative divergence. This is the first instance that I can find where $NAAD went completely in the opposite direction, and that ain’t right. Also, sometimes data is updated as the evening wears on and there is a chance that the chart won’t look anything at all like it looks at the moment, but until then….

Click here to open chart in new window.

Finally a chart of the cumulative $NYUD/CVI just as a follow up. The upper support line held today but does look to be in jeopardy. Only a very strong up day tomorrow will prevent $NYUD from dropping down through the upper trend line.

Click here to open chart in new window.

Charts courtesy of StockCharts.com